What is DeFi?

A brief explanation

DeFi stands for decentralised finance. However, before we go into decentralised finance, it's important to note how centralised finance works.

Institutions, Markets, Instruments

In traditional finance, there are three major concepts to understand:

  • Institutions. Think governments, banks, hedge funds, financial services, pension funds etc.

  • Markets. Think NASDAQ, Craigslist, Uber, Airbnb

  • Instruments. Derivatives, loans, equity, debt.

At the core of all of these is currency. Bitcoin/Ethereum have removed the need for governments and financial institutions.

Tokens, as an asset class, have created new digital, global markets.

Decentralised finance has giving access to instruments to anyone with an internet connection!

Decentralised Finance

When referring to decentralised finance, we broadly think of the following categories:

  • Lending that can be instantiated by anyone, anywhere

  • Payments that are cross-border from day one

  • Derivatives where no middle-men are required

  • Stable coins to ensure stable value

  • Decentralised exchanges to swap between assets easily and frictionlessly

All of the above are fully non-custodial and can be accessed by anyone, anywhere.

Why DeFi?

In our view, the DeFi market will continue to expand tremendously over the coming years. Below is an overview of the current state of the market.

  1. Bitwage salary volume as of 2018

  2. https://defipulse.com as of Jun 2019